Banking industry standards so low they deserve to be exposed

Banking in 2018 has become a sales game, with Westpac and credit analysis firm Equifax under fire for their practices.

Westpac are under fire. Picture: Hollie Adams

This is how low standards in the banking industry have sunk:

Item One: At the banking commission a few days ago it was shown how Westpac financed a car loan with no verification late at night to a carer on Centrelink. Worse still, the customer in question was completely disappointed with the deal, later taking up the case with the Consumer Action Law Centre.

Westpac — which had sold the loan through its Bank of Melbourne subsidiary — later agreed to pay the customer $20,000.

Item Two — Timed to coincide with the Commission hearings, Westpac has announced a sweeping review of its credit standards. The bank has hired credit analysis firm Equifax (formerly Veda) to review its internal credit processes.

The problem is that Equifax is in the sights of the ACCC...and not for the first time. In fact Equifax is in court with the ACCC since mid-March with allegations that between 2013 and 2017 it made false and misleading statements to consumers. Separately, less than three years ago Equifax (then known as Veda) was found to have breached consumer law in the marketing of its credit reports and the privacy commissioner ordered the agency refund consumers who had paid for the reports.

This time ACCC alleges ‘Equifax made a range of false or misleading representations to consumers, including that its paid credit reports were more comprehensive than the free reports, when they were not.’

Let’s look at that again: Westpac is in trouble for — among other things — ‘Liar loans,’ where false and misleading representations are the key issue. The bank has hired a credit agency to review the area — that credit agency in turn is in court for alleged false and misleading representations.

Equifax is one of three agencies hired by Westpac — Experian and Illion have also been appointed. Welcome to banking in 2018 — this is not banking... this is a sales culture which went out of control. The rest of the current batch of the Commission hearings will be around financial planning and wealth advice issues but one theme is already emerging — the regulation and compliance of the banking industry is not working.

Despite the undeniably voluminous disclosure attached to the sale of finance products — and regardless of the enormous amount of money that banks complain they spend on ‘compliance’ — the clear conclusion is that the current regulation regime does not work.

The emphasis on disclosure dates back more than two decades to the Wallis inquiry in 1995 where the current regulatory system was forged — including the key arms of regulation ASIC for general standards, APRA for prudential standards, the ACCC for competition issues and the RBA for direct banking supervision.

Now two decades later is clear this structure is out of date — it has left gaps across the market: Insurance is the glaring example highlighted by the commission in its first few weeks, there will be many more in weeks to come.